Outsourcing Times

Outsourced Burgers

The next time the lady at the drive-through burger joint asks you if you’d like fries with your burgers, you’d probably need to pinch yourself to realize that the lady is probably miles away. What’s happening? Outsourcing! Boston.com reports:

Already, Wendy's says the call center is paying off. Drive-through sales jumped 12 percent at the six stores that installed multiple drive-through lanes that are connected to a call center, according to Kevin Fritton , executive vice president of 256 Operating Associates , which runs the call center and 14 Wendy's restaurants in New Hampshire and Vermont. The call-center employees, who earn about $8.50 an hour, are trained to urge customers to add items to their order and are timed on how long each call takes.

Read more: Miles away, 'I'll have a burger'

Outsourcing Re-engineering Services: Rewards & Dangers

--By Priya Jestin, Staff Writer

When a firm outsources its re-engineering services, it can do away with the necessity of having to provide large infrastructures with the requisite machinery. Not only is this method more practical, it is also very cost-effective. This way, the firm can concentrate on its core activities. And now that the market is expanding, there is a growing business segment that offers re-engineering services.

While all this sounds very good, there’s one worrying aspect. Does the outsourcing argument allow for quality management in re-engineering services? One of the biggest problems a firm may face is of ensuring that the final quality is as good. Also, the work should be in line with original-equipment manufacturer specifications. These are important factors that influence the operational reliability of plant and equipment.

Tips To Know When It’s Time To Outsource

Outsourcing has today, become more of a need as companies feel an increasing need to reduce costs and focus on the core business of developing, manufacturing, and marketing their products. Pharmaceutical companies are no different. Only problem is, how does a company know when the time is right to outsource? Manufacturing.net reports:

There is no better indicator of a company’s health than its financial results. All companies are driven by their return to shareholders or owners. If the results are not as strong as they should be, it is time to thoroughly examine the cost structure. This is more than a financial analysis; it is a strategic and organizational exercise as well.

Read more: Determining When To Outsource: Indicators For Pharmaceutical Companies

Research Outsourcing Worries US Academic Circles

While outsourcing has been widely accepted as a necessary evil across the United States, there is one area, which is still held as sacrosanct in academic circles – research (where effective communicating and conferencing can be difficult across oceans). Now, there is growing concern that the US might lose its competitive edge by outsourcing jobs, which are on the bleeding edge of research to countries like India and China. DNAIndia.com reports:

University of Texas Professor Ted Rappaport’s research shows that all but five of the 57 major research initiatives announced were located outside the US. “The professor believes that as a result, US students have lost interest in entering graduate school to pursue research in the telecom field,” said the BusinessWeek column.

Read more: Research outsourcing worries US

Now We’re Outsourcing Drug-testing As Well!

Now every time you pick up that phone to call a help line, you probably wonder if your call will be routed to India. If you say you didn’t think of that possibility, you are only kidding yourself. The fact is that the names India and China have become a byword for almost all kinds of work. Now if this latest bit of news is to be believed, even the drugs we take will not be spared of the India/ China effect. How?

There is a very strong likelihood that these drugs will have been tested on people who live outside the United States. This means they live in places like India, China or Russia. I really don’t know if this is a good thing or a bad thing. But let’s face it. Human clinical trials are a necessary part of any drug’s development. Courierpostonline.com reports:

Big pharmaceutical companies are increasingly looking outside the country to find locations to conduct the human clinical trials that are crucial to the development of new drugs, according to Gannett News Service. Drug companies are finding it quicker, easier and cheaper to test subjects overseas rather than in this country, experts say.

Read more: Outsourcing extends to clinical trials

Bio-outsourcing is Booming

The bio-outsourcing market is booming, thanks to the benefits of outsourcing for the biomanufacturing organizations. Many biomanufacturing companies are outsourcing their operations to offshore destinations. According to estimates, over 50 percent of biopharma companies will outsource at least some aspect of their biomanufacturing activities. The reason is clear. Biomanufacturing is a complex, costly and labor-intensive process. Ongoing labor shortages and increasing costs of building biomanufacturing facilities have forced many biopharma firms to turn to outsourcing for help.

Read my previous post titled "Are You Looking to Outsource?" to get some tips on outsourcing.

Outsourcing of Analytical Laboratories

According to research studies, outsourcing of analytical laboratory market is growing at a rapid pace. It is expected to grow further over the next seven years. However, small laboratories are in danger of declining. According to a report published by Frost & Sullivan, the revenue generated by the analytical services market in the US was $603.1 million. It registered a significant increase of 2.9 percent in the first two quarters of 2006. The market is expected to reach $743.3 million by 2012. This boost in the analytical market is driven by steady demand from pharmaceutical companies.

Our previous post titled "Right Balance for Outsourcing" will give you useful information about outsourcing.

Outsourcing goes extra-terrestrial

It's truly the era of outsourcing. After carving a big pie for itself in industry segments catering to the material requirements on the ground, outsourcing is set to cater to requirements in outer space. The Indian Space Research Organization (ISRO) is now turning to the outsourcing way by farming out its satellite and rocket development work to private companies.

If all goes well, private companies will soon be building entire satellites for ISRO. The step has become necessary because of the increasing demand for putting satellites into orbit every year.

It is interesting to note that the recent crash of the GSLV satellite was because of a mechanical fault in an engine built by a private firm. However, this doesn't seem to have deterred ISRO in its outsourcing program.

ISRO has already short listed eight companies—including industry leaders like L&T, Tatas, Mahindra and Godrej—and in the next few months, proposals from these companies will be reviewed and finalized one way or the other.

IBNLive has more on the story.

Offshoring Risks

Domestic outsourcing and offshoring share most risk characteristics. A more complicated chain of control incur when offshoring financial services and related data may create new risks when compared to domestic outsourcing. Offshoring introduces an element of country risk to the outsourcing process. Significant offshoring risk areas include:

• Country Risk
• Operations Risk
• Compliance Risk
• Legal Risk
• Credit Risk

Read my previous post titled "Did Outsourcing Raise Level of Wages?" to get more information on outsourcing.

Outsourcing Opportunities for Indian Advertising Industry

Recently, I had written a post titled "Media Outsourcing Services in India" that focused on media outsourcing services in India. today, it is the turn of advertising industry. It seems that opportunity is knocking at the doors of Indian Advertising Industry. Now the Indian Ad agencies can go and grab international business in a more focused and organized manner.

The global advertising outsourcing business is estimated at $280 billion. Of that amount, $50 billion is believed to involve creative work and production. Experts started to believe that Indian would become the next hot destination for Ad outsourcing. The Indian advertising industry is estimated at $2.8 billion. However, it has the skilled personnel who work at low price. That will help it to become a global outsourcing powerhouse.

Right Balance for Outsourcing

Before outsourcing your business, reconsider the base on which you are making the decision. You must examine every process, every management policy, every initiative and the complexity of the current product or service. When there is a competition among the companies, design, quality, cost and customer satisfaction come into fore. While outsourcing their business, companies always focus on these factors.

The central issue of outsourcing is the actual cost savings realized by an organization in comparison with its own domestic costs. The most important factor behind outsourcing is the level of commitment made between concerned companies. The basis of the outsourcing decision should be the result of a balance among performance, values and willingness to dedicate organizations to performance excellence.

Read my previous post titled "Choosing the Right Time for IT Outsourcing" to get some tips on IT outsourcing.

How to Select an Inbound Call Center?

Selecting the right inbound call center is a challenge for any company that is seeking to outsource its business. The outsourcing of inbound calls includes cost saving, process management and better customer service. It is important to know whether the chosen inbound call center possesses the capacity and scheduling to handle your calls. You must have a complete understanding of your requirements before investing time in examining inbound call centers. Once you are clear about your requirements, you will be in a better position to make the right cut.

You have another way of determining whether a particular call center is a useful partner or not. You can find this by visiting the site. A visit to the site will help you understand how the company treats its employees and if its staffers are energetic and positive or not. You can also read sample scripts and listen to phone calls. That will present a clear picture about how the call center handles its customers. The most important thing to be remembered is that your preferred inbound call center must have customer service as first priority.

Knowledge Process Outsourcing in India

In today's competitive environment, there is a growing trend of specialized skill sets. Now companies focus on their core competency areas and outsource the remaining business. Most companies acknowledge that outsourcing not only minimizes the cost, but also propels the growth of the organization. Knowledge process is one such area that requires outsourcing to bring more effectiveness and efficiency in the process. India is witnessing a high growth in terms of knowledge process outsourcing. Following are the main characteristics of knowledge process outsourcing:

• Excellent infrastructure and security system
• Well-qualified professional having in-depth knowledge and experience in respective fields
• Quality work
• Consistency in quality performance
• Adaptability to various data formats
• High productivity

Companies that outsource their knowledge process have the following tasks that are managed by skilled professionals in India:

• Research and Analysis
• Business and Market Research
• Investment Analysis
• Legal Research
• Finance and Accounting Services
• Educational Services
• Medical Services
• Network Management
• Report Writing
• Content Rewriting
• Data Management

There is no dearth of knowledgeable and skilled professionals in India on the above areas. They produce quality work at a lower price. This is the main reason why knowledge process outsourcing is growing in India.

Role of Enterprise Risk Management in Outsourcing

It has been noticed that companies import risk from external organizations via links through enterprise resource planning (ERP) and supply chain management (SCM) systems. However, the fastest growing source of importable risk is from your outsourcing partners. Evidences suggest that the quantity and scope of enterprise risk from outsourcing is expanding rapidly. Many small and medium sized companies are now relying on outsourcing through their IT systems.

Although outsourcing brings efficiency and cost saving, a poorly managed outsourcing relationship may put your entire IT system at risk. When you have options, why take a risk? It is strongly recommended that ERM must be extended to your outsourcing partners. That will definitely negate the strategic and market risks associated with your organization.

China to Promote Outsourcing Business

China has become one of the major outsourcing destinations for the companies that are doing off shore business. Although China is still lagging behind India on outsourcing, it has made significant progress over the past few years. In order to give a boost to its outsourcing industry, the Chinese government has decided to prioritize service outsourcing in the coming years. The government will establish specific policies to encourage service outsourcing in China.

For long, the Chinese government has been seen opposed to outsourcing. However, the situation has changed to a great extent. The government will also provide enterprises with financial support such as low-interest loans and insurance of credit for large-scale offshore projects. The government has also decided to persuade 100 multinational corporations to transfer their outsourcing businesses to China. If everything goes as per the schedule, China will definitely become a major hub for outsourcing activities.

Healthcare IT Outsourcing in Europe

European healthcare organizations are planning to outsource more IT operation because of tremendous financial burdens. They are unable to maintain their IT operations with the limited resources. Hence, they find it necessary and useful to outsource the entire operation to third parties. Most hospitals in Europe lack the resources and skills to build IT infrastructure and maintain them efficiently. They are also unable to train their staff to handle complex software packages. Under such circumstances, outsourcing the function remains the only viable solution. The trend towards IT outsourcing is also being encouraged by many governments in Europe, as they want to modernize and improve their IT systems.

According to Outsourcing-Russia -

"Healthcare IT outsourcing is now a proven business model in Europe due to highly visible contracts such as those between Britain's National Health Service (NHS) and British Telecom (BT), as well as many smaller contracts in different countries in Western Europe," said the Frost & Sullivan analyst, Siddharth Saha.

Offshore Outsourcing is Set for a Huge Growth

There is no denying that offshoring has become a growing phenomenon. However, it has received more criticism than positive responses. Critics say that it disrupts distribution of communication paths and violates human rights. However, the supporters argue that offshoring is a free international trade that is positive for global economies. Despite the controversies, a large number of outsourcing deals involving outsourcing are currently under negotiation.

Indian companies still dominate the outsourcing industry. Although outsourcing demand in Europe has fallen drastically, the UK's demand for outsourcing is growing steadily. The strength of the UK market has been demonstrated by the growth in BPO by the UK companies. The UK accounts for more than 25 percent of the total value of business process contracts signed worldwide in 2006.

Is IT Outsourcing Boom is Over in India?

It seems that the IT outsourcing boom is over in India and elsewhere in the world. This is because the companies have learnt to be strategic and selective. However, it is too early to say that the It outsourcing is at the fag end of its growth. In India, outsourcers are now looking to China to reduce their growing labor shortage.

Major IT and BPO hubs are reaching labor saturation and are desperately looking for educated resources in other parts of the world. The current situation in India will drive both buyers and service providers to expand their list of possible locations for operations. It will provide an opportunity to other countries to grow in outsourcing business.

Financial Express reports that -

The latest Diamondcluster study reveals some troubling signs for onshore service providers. For example, less than one in three buyers of onshore services reported that all their expectations are being met, compared to 47 per cent of the buyers of offshore services.

Indian Companies Dominate the Global Outsourcing Deals

Outsourcing business has become an integral part of Indian industry in the recent years. According to reports, Indian companies have bagged the biggest outsourcing deals in 2005-06 made their presence in the global arena. Indian companies have received the lion's share in the global outsourcing industry. Despite the controversies surrounding off shoring in Britain and elsewhere, outsourcing deals are being signed on a constant pace.

Some British firms such as Powergen and Abbey have withdrawn their call centers in India. However, that did not deter others from outsourcing their work to India. The economic compulsion of outsourcing of back office operations holds the edge here. The current trend shows that there is hardly any dissatisfaction with offshore outsourcing.

Daily India reports that -

The analysis reveals that this growth in offshore outsourcing is further evidenced by impressive gains for the Indian service providers, whose market share has risen to 5.2 percent of the total value of contracts signed so far this year - up from less than 3 percent in 2005 and just over 1 percent in 2004.

Wiltshire Signs £12m Outsourcing Deal

Wiltshire County Council has outsourced the management of its IT infrastructure to services provider Steria in a £12m five-year contract. Steria will take over the operations of the Wiltshire County Council's IT infrastructure at the beginning of October 2006. It will manage systems used by 3,500 council workers. About 900 workers are now based at County Hall in Trowbridge. Other workers are based at 200 other sites across Wiltshire. This contract will provide the flexible framework to deliver improved services. Developing a new infrastructure and improving technology are part of the business change process.

According to VNU Net -

Tim Gregory, head of IT at Wiltshire said: 'We are enabling major changes across the authority, and we wanted to be able to try and drive that change by providing technical facilities and a good IT service to ensure that we can make the changes in HR practices and Financial management that we need to make.'

Threadneedle Holding Outsourcing Talks with JP Morgan

Threadneedle Investments has begun outsourcing talks with US bank, JP Morgan. Threadneedle is one of Britain's largest asset managers. It intends to outsource its back-office operations to JP Morgan. Threadneedle has about 73 billion pounds of assets. It is having exclusive negotiations with JP Morgan to appoint the bank as provider of services such as settlement, valuation, pricing and accounting for all Threadneedle's funds. In the recent years, a number of firms based in the United States have signed outsourcing deals with fund management companies. Fund managers are expected to hand over operations to outside businesses to cut costs and improve services. It is no surprise that Threadneedle also wants to improve its organizational efficiency.

Outsourcing practitioners meet in London

The outsourcing world conference and exhibition will be held in London on July 12 and 13, and this forum will be used by both users and suppliers of outsourcing services from leading outsourcing destinations such as India, China, Russia, Romania, Malta, Czech Republic, and the Ukraine.

The meet will be particularly beneficial for small and medium-sized companies because experienced campaigners will be at hand to share their expertise and advice.
Among the specific issues that will figure in the two-day conference are an overview of global business services, outsourcing of IT services in England, partnerships and offshoring, legal and security concerns, and the issue of hidden costs in outsourcing deals.

Click here for details on the conference.

Outsourcing widens its horizons

When we think of outsourcing, our first thoughts go to the IT and BPO industries. However, the service area of outsourcing is constantly reinventing its frontiers. Have you heard of chemical synthesis outsourcing? Surprisingly, it is quite a mature service area in the outsourcing industry, and is arguably the fastest developing service area in R&D outsourcing. Research and Markets is providing this service in China, enabling the creation of a large number of molecules and libraries at low cost. As Genetic Engineering News reports:

Chemical Synthesis in China provides a comprehensive resource for Western chemical companies and new drug research entities. Critical information is presented for those interested in sourcing, OEM, or exploring the custom chemical synthesis business in China.

Click here for more information.

Annual wages in offshore markets rising at 8 to 11 percent: Everest report

There have been several reports that wages in the IT outsourcing and BPO sector in countries like India are increasing disproportionately, and that the outsourcing industry will not be able to sustain itself in the long run. There are fears that in a few years' time, the economic advantages in outsourcing destinations like India will burn out, and that it will no longer be viable for outsourcers to seek vendors in these destinations.

However, according to findings of the Everest Research Institute, the picture is not that grim. Contrary to popular belief, wages in the outsourcing sector are rising at 8 to 11 percent on an average, nearly half of what has been generally projected. In India, the highest rise in wages is 13 percent for a senior customer acre executive in a call center. The majority of employees in the outsourcing sector only get a 6 percent increase.

The Everest report foresees that Asian markets (India, China, and the Philippines) will be able to sustain the offshoring activity for another 18-25 years. Central European markets have a smaller lease of life (3 to 6 years), while Mexico can ride high on the outsourcing wave for another 30 years, according to the projections in the report.

Legal Outsourcing in India

Customer Support operations have been part of Indian BPO industry for a long period. Now legal outsourcing firms in India are growing significantly. With big clients abroad, these firms are attracting well-experienced corporate lawyers and students from leading law schools. Several legal firms in Mumbai and Bangalore have received outsourcing contracts from the United States and the United Kingdom.

Several lawyers with vast experience and many fresh law graduates from India's leading law schools have already joined the legal outsourcing firms that are paying high salaries. Pangea3, which began operations in Indian in 2005, has now a client base of 50 in the United States. Fifteen of these fifty companies are fortune 500 companies. In legal outsourcing firms, employees work on analysis of patents, drafting contracts, reviewing litigations and corporate issues.

Money Control reports:

Once lawyers learn that the work that we do for clients around the world is sophisticated than what they may see or have seen in law firms, they become quite interested in what we are doing.

Offshore Spending to Increase

Research firm Gartner has predicted that offshore spending will increase by 50 percent in 2006 and 2007, with firms in the UK being the biggest contributors. Spending in the US market will increase by 30 percent, while Germany and the Nordic region are expected to increase their offshoring demands. The number of firms that use overseas service providers is expected to climb to 20 percent over the next two years, from the present 13 percent. India still remains the favored destination, followed by China and Brazil, though the Czech Republic, Hungary and Slovakia are emerging contenders to be reckoned with.

Large Pharma companies rely on outsourcing to reduce costs

Large pharmaceutical companies are facing tough times with rising research and development costs coupled with slowing sales. The outsourcing sector is gearing up to combat these tough times and it is expected that there will be increased dependence on outsourcing by the pharma companies for reduction in costs as well as help the companies to minimise development cycle duration. Genetic Engineering News reports:

Pharmaceutical spend on outsourcing faces double-digit growth for the next three to five years and yet, if outsourcing is to meet these challenges, new models of collaborative and cooperative working are needed now.

Outsourcing may have a new face

The Department of Atomic Energy (DAE) in India is considering the possibility of outsourcing uranium exploration under the aegis of Atomic Energy Act as quoted by Anil Kakodkar, Chairman of Atomic Energy Commission and Secretary of DAE. He further added that if this proposal goes through to reality, it would be possible to make optimum utilisation of India's uranium resources. New Kerala reports:

"Opening up uranium mines for private parties is the policy decision of the government, but we are exploring the possibility of exploration of uranium in-house as well as through outsourcing mode," Kakodkar said. "Data interpretation and data collection could be part of the activities that DAE is contemplating to outsource," he said.

Pharmaceutical industry leaning towards outsourcing services

Services in the arenas of finance/accounting, logistics and human resources, and IT are now being provided by contract research organizations (CROs), and the pharmaceutical industry is taking advantages of these services to counter the problems of rising costs of drug development and increasing drug discovery times. CROs have contributed their expertise in geographic coverage, making it possible for researchers situated at far-flung areas to access data simultaneously and thereby cutting down on the reporting time.

According to research firm Frost & Sullivan, outsourcing permits pharmaceutical companies to reign in their expenditure and utilize funds effectively. The European outsourcing trend points to an expansion of the European drug discovery outsourcing market to about 5.1 billion by 2011.

However, there is also some hesitancy among companies to adopt the outsourcing model because it is feared that outsourcing might lead to loss of control over processes. In the light of this, it is important that companies evaluate the track records of outsourcing service providers before committing to a contract.

Frost & Sullivan published its report on "The European Active Pharmaceutical Ingredients Market" and Outsourcing Trends in early November. This document includes the revenue forecast for the total European active pharmaceutical market with geographic trends and analysis, new opportunities in the sector, market challenges, and positive strategies. The report analyses about 40 key market participants, including Akzo Nobel Pharma, Amgen, Aventis, DuPont Pharmaceuticals, Merck & Co, Inc., Roche, and Pfizer.

Global IT Outsourcing Summit 2005 in Shanghai

China’s industrial epicenter Shanghai is hosting the Global IT Outsourcing Summit 2005. The Summit opened with 200 participants, including IT professionals from leading companies in the UK, Korea, and China. People's Daily Online reports:

An important topic of the summit is to set up the East China -- Yangtze Region Software Industry Cooperation Alliance. Zhou Yupeng, vice mayor of Shanghai, said at the opening ceremony that the city's software industry has maintained a growth rate of 50 percent since 2001.

Sony Ericsson moving part of R&D program to India?

India is fast becoming a leading destination for R&D outsourcing. Several leading technology companies have already moved their R&D functions to India. This impressive list may soon include mobile phone manufacturer Sony Ericsson. The company is reportedly considering India as the base for part of its R&D program, which is currently entirely based in Sweden.

A feasibility study is being undertaken for the move to India. Speculations are also being raised about the company setting up a manufacturing unit in India, but Sony Ericsson refused to comment on this issue. Indiadaily.com reports:

The company is planning to unveil its latest products across the entire range at the second Mobile Expo that would be held in Pragti Maidan here from October 21 to October 24. [General Manager of Sony Ericsson's India operations, Sudhin Mathur] said the new products will exhibit convergence of technologies in both entry level and the high-end segment.

AB Volvo records rapid growth in India, expands components outsourcing

AB Volvo, the Swedish commercial vehicle company, announced that it will increase its components outsourcing from India from $75 million in the current year to $100 million next year. This step is in line with other giants like General Motors and DaimlerChrysler who have leveraged the low cost of Indian vendors. Volvo has had a presence of more than seven years in India, but initiated sourcing of work in 2003.

In the last two years, Volvo has doubled its outsourced work. The company expects this growth trend to continue over the next two years, in spite of the slow growth in infrastructure development. Volvo is already planning new ventures in India, such as setting up an R&D center with MindTree Consulting. Initially, this center will cater to the development of engine and engine parts. Sify.com reports on other ongoing activities of Volvo in India:

Volvo, which started assembly operations in 1998 in the country, started sourcing from 2003 with $17.5 million worth of exports. Since then, it has outsourced $32.5 million in 2004 and $75 million this year. The Indian arm has also started exports of trucks to South Korea and buses to Bangladesh. Year-to-date, the company has exported 88 units. The Indian arm has a capacity of 1,300 vehicles per year.

Read More: Volvo to raise components outsourcing

Technology Forecasters Inc. to hold event for outsourcing relationships and supply chain in Munich

Technology Forecasters Inc. (TFI), an industry leader in information for effective electronics manufacturing outsourcing relationships and supply chain, will be holding a quarterly event for outsource manufacturing between November 2 and 4 this year in Munich, Germany. The event host will be Avnet Electronics Marketing. On the anvil are discussions centering around the reports of TFI on studies that the company has carried out in the EMS industry.

These reports include studies on forecasts on the EMS and ODM industries, alternative business processes for ODMs, and recent trends in the EMS industry in Europe. Besides, the Munich event will also be analyzing many networking events, and feature TFI's Global Pricing Workshop. Registration details are provided in an article published by EMSNow.com. EMSNow.com also reports:

TFI's just released Five Year Forecast projects total revenue in the European EMS/ODM industry to be US$39,848 million by 2009. The region continues strong in the communications and automotive segment. "As the EMS industry has expanded into other regions of the world, TFI has also expanded its research coverage," noted TFI Senior Analyst, Eric Miscoll. "Our analysts in both Europe and Asia have conducted research studies and in-depth interviews with OEMs and EMS companies in these regions. It's time for the Quarterly Forum event itself to occur in Europe to enhance the dialogue with our European members."

Read More: Unique strategies for outsourcing in Europe featured in first TFI Quarterly Forum in Munich

Global Pricing Workshop to be hosted by Technology Forecasters Inc.

Surface Mount Technology reports that a Global Pricing Workshop will be hosted by Technology Forecasters Inc. (TFI) on October 5 this year in San Jose, California. OEMs are often not able to reach a correct estimation of the total cost of ownership for outsourced services related to manufacturing, and this workshop is aimed at helping the OEMs overcome this problem.

TFI has conducted a study of several hundred OEMs and contract managers, and will share the findings with participants at the workshop. Participants will also get to know strategies and methods that will enhance margins and prevent unplanned expenditure. The workshop will be conducted by Charles Barnhart, senior consultant at TFI. Participants will be able to use cost models and templates to effectively scale down costs. Surface Mount Technology reports:

[The Workshop will also provide] benchmark information to help compare labor, acquisition and mark-up costs for different regions; geographic advantages and disadvantages; pricing for engineering, manufacturing and post-production; and OEM and CM best practices.

Read More: Technology Forecasters Hosts Outsourcing Workshop   

India and China emerge as centers for clinical research and development: Frost and Sullivan Report

Laboratory Talk reports on a recent study by market research company Frost and Sullivan, which has projected India and China as rising economies which facilitate outsourcing in the pharmaceutical industry. There are already moves by pharmaceutical companies to outsource their research and development activities to India and China, and this has enabled the companies to reduce cost, time, and risks.

One of the avenues of such outsourcing is to establish relationships with local companies and expertise. The Frost and Sullivan study emphasizes the advantages of outsourcing to India and China, but simultaneously echoes the concerns of some firms regarding the quality of service and infrastructure available in the two countries. However, efforts are being made to improve the standards, and build a conducive environment for clinical research and development. Laboratory Talk concludes:

For companies wishing to make best use of the regulatory changes and high quality research, considering alliance strategies and identifying regions of opportunity should be priorities, says Frost and Sullivan. Embracing these changes through innovative strategies and flexible approaches will allow international pharmaceutical enterprises to capitalise on these new attractive propositions.

Read More: Pharmaceutical firms outsource R and D to India

Erroneous Study Denounces Importance of Outsourcing

A recent study reveals what we all already know, that outsourcing alone is not sufficient to sustain an ailing business.  The report was conducted by the Center for Automotive Research which concludes that managers feel that proper execution of business basics such as developing innovative products and customer service are far more important that cheap labor. 

This is a fantastic example of a useless survey.  Of course people will feel as though developing a good product and marketing it effectively is more important to their success than cost cutting.  But that's not the issue.  The issue is whether in today's competitive global marketplace a company can survive solely by producing a good product and marketing it effectively.  As far as this author is concerned, the answer far more often than not is, no.  A company must constantly embrace cost cutting because the value placed on quality does not compensate for the higher labor costs necessary to achieve such quality.  Rather, there exists a floor above which all products are considered virtually equivalent.  The key is to reach that floor by spending as little as possible and avoiding all legacy costs.  This, almost by necessity, means more outsourcing. Forbes.com reports:

For instance, when executives were asked to rank a variety of factors on a scale of 1 to 5 in terms of their impact on the companies' long-term future success, "developing engineering and intellectual property unique to their firm" was ranked number one.  Somewhat less important were "pursuing increased engineering and design responsibility" and "optimizing (their) supply chain," with mergers and acquisitions, and outsourcing ranked last.

Read More: Major US Auto Suppliers See Execution of 'Business Basics' as Key to Their Future Success

TPO Survey Reveals Executives Educated and Gung Ho about Outsourcing

According to a recent report by TPI, the offshore outsourcing market is ripe for sudden growth.  The report studied the results of 100 senior UK executives regarding their interest in expanding their offshore outsourcing operations.  A full 81 percent of respondents indicated that they planned to increase expenditures and energies in outsourcing while a mere 4 percent said they planned to decrease.  While these types of surveys have been rather common in recent years, and do not necessarily corrolate with a sharp increase in outsourcing expenditures, the overwhelming numbers here do indicate a strong potential for growth. 

In the past, these surveys carried less weight because many executives reported fondly about plans for outsourcing, but had little intimate knowledge of the costs and how to go about such a move.  This report, by contrast, also asked respondents about their knowledge of offshore outsourcing, and found that the vast majority were well aware of the conditions of outsourcing but were nonetheless interested in pursuing the matter. Managing Information News reports:

Our survey results clearly indicate that there is very little disillustionment with offshore outsourcing.  What we can ovserve, however, is a general shift towards more sophisticated sourcing strategies as the global sourcing market comes of age.

Read More: Offshore Outsourcing Set For Continued Growth, According To Report

McKinsey Report Indicates Which Industries will be Affected by Outsourcing

A recent report by McKinsey indicates that by the year 2015, 12 countries could make up nearly half of US manufacturing imports due to their low-labor costs.  According to the report, the first wave of outsourcing consisted merely of labor intensive sectors such as the most notorious, footwear and high tech niche markets such as consumer electronics.  This recent report suggests however, that as Indian and Chinese companies attempt to shift up the value added outsourcing ladder, they will begin to compete with US manufacturing firms in areas that have traditionally been dominated by western firms.  Specifically these include more skilled and capital intensive products such as vehicle components, advanced machinery, pharmaceuticals, and telecom equipment.  Stimulating these advances are infrastructural advances in places like India and China which now allow companies based there to recieve the necessary imputs on a regular basis so that they are able to produce reliably and regularly.  Additionally, as patents in the US and other western nations expire, the creation of idential products at only a fraction of the cost by outsourcing destination countries becomes inevitable.  IndiaTimes Reports:

As imports from low-cost countries skyrocket, the manufacturing landscape could soon look quite different.  Global supply-chain-management skills will be crucial, as will the ability to build supplier networks in low-cost countries.

Read More: Outsourcing: The big wave still to come

WTO Says Western Concerns Over Outsourcing are Overblown

The World Trade Organization (WTO) has recently released what has been taken as a rather scathing criticism of western nations who are increasingly reverting to protectionism in an effort to insulate domestic workers from foreign competition and job loss through outsourcing.  The report quite expectedly, reiterates the benefits of the free market, discussing the benefits of injecting cheaper imputs to drive long-term productivity and innovation.  It also argued that the hype has been far overblown with far fewer jobs being lost through offshore outsourcing than people suspect.  The report also tried to put into perspective the relative size of the IT offshoring industry, which make up less than 2.5% of commercial service in that period. New Kerala Reports:

Refutting the apprehension the report said, "the most curious aspect of this heated debate is that all expectations and fears of outsourcing and the backlash against it in the high income countries are based on very partial, selective information, mostly from private sources or anecdotal evidence."

Read More: Developed countries apprehension of jobloss due to outsourcing is exaggerated: WTO

WTO Report Presents Important but Limited View of Outsourcing

Despite public sentiment to the contrary, the World Trade Organization recently reiterated that outsourcing is neither a major employment contributor to destination countries nor a major source of unemployment for source countries. The WTO report cites a free-market comparative advantage rationale for explaining the overall economic benefits of outsourcing.  It goes further to argue that the relative size of outsourcing is so small that even if it were negative its impact on economies would be minimal.  The report states that rolling together all technology related outsourcing combines to form less than 0.25 percent of the employed Indian labor force. While certainly the WTO should be expected to produce a report touting the positive aspects of outsourcing while minimizing its negatives, this report is still quite importantbecause it does once again underscore the free market justifications of outsourcing as well as put into perspective the relative size of the practice.  That said, this author would have preferred at least some commentary on the displacement costs associated with outsourcing as well as what the costs should be if such displaced individuals are to be reincorporated back into economically efficient sectors.  The Hindu Reports:

"Most of the expectations and fears related to the size and dynamics of offshoring of IT services are exaggerated.  At present, the impact of offshoring services jobs is far stronger in the popular perception than on actual production, employment and trade patters," says an 'essay' on offshoring of services released as part of the WTO's annual World Trade Report 2005.

Read More: Fears on outsourcing exaggerated: WTO

Panel Discusses US Professional Labor Shortage

A recent panel out of New York commented this week on the hidden complexities of offshore outsourcing.  The panel, which was titled “New Trends in Globalization of Services” discussed the recent surge in reports from those who are finding their outsourcing experience less than was initially hoped for.  It also pointed out that as outsourcing to a few particular countries such as India becomes more competitive, companies will begin to have to explore yet other labor markets to maintain the margins they originally estimated.  That is not to say however that the panel gave a negative impression of offshore outsourcing.  Rather, Alok Aggarwal formerly of IBM discussed the labor shortage of professionals within the United States which will grow to 5.6 million by 2010.  This shortage will mean the loss of $2 trillion in output if the void is not filled via immigration or outsourcing.  The Journal News Reports:

Other nations are happy to step into the breach, from the comfort of their own offices. Aggarwal’s company employes 725 people in India.  About half have MBA degrees, and the company employs a cluster of people with doctorates and law degrees, he said.

Read More: Outsourcing comes with complexities

Enthusiasm About HR Outsourcing Slowing

A recent survey of 135 companies by Watson Wyatt indicates that the majority of companies have not delved extensively into Human Resources Outsourcing, but plan to wade in to those waters very slowly and selectively.  The report indicates that only 7 percent of surveyed companies stated that their HR department was "mostly outsourced." While a large majority of companies outsource transactional Human Resources activities such as 401(k) administration and pension administration (84% and 71% respectively), much fewer companies report outsourcing which extends much deeper.  While the survey stated that 36% of respondents planned to expand their outsourcing operations in the next two years another 7% indicated that they will cutback in this arena. BLR Reports:

Despite much speculation otherwise, there is no headlong rush toward the total outsourcing of all HR services. Many companies that investigate full HR outsourcing alternatives choose to refine their existing delivery model rather than outsource everything."

Read More: Companies Selective When Outsourcing HR Functions

2005 Study Indicates Increased Security and Quality Concerns in Outsourcing

A recent report which surveyed 300 corporate technology-decision makers indicated that just 28 percent of organizations believe that IT outsourcing can provide major cost savings.  Additionally, the study revealed a number of underlying concerns in the minds of potential outsourcers.  Over half of respondents indicated that a loss of internal knowledge was a major disadvantage of outsourcing, while another 41 percent indicated that lower service quality was a major concern.  Potentially the most worrisome statistic for outsourcing companies is the fact that such concerns were significantly lower just two years ago when only 23 percent indicated service quality as a major disadvantage.  While this survey seems somewhat of an outlier statistically, it does coincide with the recent trend seen in many large companies who are bringing IT work back in-house.  Such news raises more questions about the sustainability of outsourcing and its long-term effects on western business. vnunet.com Reports:

'For many organisations, cost is no longer the most significant benefit,' he said. 'Outsourcing has matured and, over time, perceived cost savings can be eroded by increased management time and poorly-envisioned contracts.'

Read More: Outsourcing out of favour

Deloitte Report Indicates Waning Interest in Offshore Outsourcing

A recent report by Deloitte Consulting verified what those close to the outsourcing industry already knew, there is a waning financial interest in one-stop offshoring to India and China.  While Deloitte is quick to point out that outsourcing will almost certainly offer infinite advantage to firms in some situations, the rising wages, security concerns in outsourcing countries coupled with increasingly technically specific needs by companies is already taking its toll on the offshoring industry.  The Deloitte report simply confirms this by stating the increasingly large companies are choosing to use multiple vendors rather than outsourcing through one single firm, while simultaneously moving some areas of operation back in house.  The Financial Express Reports:

“In the near future, with structural risks that cannot be fully mitigated, uncertain cost savings, and a multitude of components to manage (people, process, and knowledge), outsourcing will likely lose lustre for large organizations,” the report says.

Read More: Deloitte report casts shadow over outsourcing boom

R & D Outsourcing Offers Huge Cost Savings

Despite increasing evidence that US companies are not achieving the types of cost savings they anticipated when entering into outsourcing contracts, in the field of Research and Development the savings still heavily outweigh the costs.  While in some fields the wage differentials have shrunk to the point that including administrative costs in offshoring makes it hardly worthwhile, R & D continues to offer huge multiples for western firms.  The profitability of such contracts is evidenced by the more than 500% growth of Indian pharmaceutical firms in recent years, a rate driven primarily by western outsourcing. Business Standard Reports:

"While the average R&D cost in the US is $400,000, it is $250,000 in Europe and only $50,000 in India," said Motti.

Read More: 'Outsourcing' set to catch up